Oct. 4, 2012
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by Jon Swartz, USA TODAY

by Jon Swartz, USA TODAY

SAN FRANCISCO - Imagine Tom Brady leaving the New England Patriots and the team putting together, by some measures, its best season ever the following year.

That's what Apple has done in the year since Steve Jobs died Oct. 5, 2011. The company he co-founded, was banished from and ultimately saved has been on a magic carpet ride of outsized market value, revenue and sales projections. Much of the success goes to Jobs, who put his beloved creation on the path to glory, and whose fingerprints are all over its current and future plans.

"Apple had a better 12 months than many firms have in 12 years," says Michael Gartenberg, an analyst who follows Apple for market research firm Gartner.

Apple has taken the trophy for most valuable U.S. company ever and currently holds a market capitalization of $629.4 billion.

The new iPhone 5 is out, with sky-high sales projections. Apple has sold an estimated 6 million to 10 million iPhone 5s in the two weeks since its release. To date, 243 million iPhones have been sold. By the end of 2013, that figure is expected to eclipse 500 million. (IPhone accounts for 53% of Apple revenue, and 70% of its profit.) With the newest iPad and Apple TV expected soon, Apple's stock could climb higher.

But without Jobs to look over Apple, how long can the magic ride last, asks Vivek Wadhwa, vice president of academics and innovation at Singularity University. The Silicon Valley company faces growing competition from the likes of Google, Amazon and Samsung in the fast-paced tech market.

The forceful visionary - considered one of the greatest business and marketing geniuses ever - set such impossibly high expectations at the company that with each passing day, maintaining Jobs' standard becomes more difficult, Apple watchers contend. Jobs' name is synonymous with the Apple brand not only in terms of innovation but in culture: He was its public face, as Walt Disney was with his company, says Paul Saffo, a technology futurist who teaches at Stanford University.

"Apple just had one of the most extraordinary 15-year runs" in business history, says Adam Lashinsky, a Fortune writer and author of Inside Apple. "It is unreasonable to duplicate that, even if Jobs were still alive."

To be sure, there have been occasional misses. The flawed new map application on iPhone 5 in all likelihood would not have passed muster with the perfectionist Jobs. Apple CEO Tim Cook said he was "extremely sorry." A TV ad judged as subpar aired during the London Olympics and soon disappeared. The humorless and cheesy "Genius" spot never would have made it past the drawing-board stage with Jobs in charge, former Apple employees say. (Jobs had his own missteps, including antennagate, when the signal strength of the iPhone 4 was diminished when users touched the lower left edge of the phone.)

"I shudder to think what he (Jobs) would have said about that ad," says Tom Suiter, whom Jobs hired as a creative director in 1982 and who recently helped design J.C. Penney's new logo. "The bar is so high for them now." The hands-on Jobs micromanaged day-to-day operations, down to helping design and conceptualize TV ads.

With a 7-inch iPad on the near horizon and rumors of the latest iteration of Apple TV delayed until next year, analysts such as Charles King are grumbling that the company's product line has become derivative. It's been years - considered a long time in tech - since Apple delivered a "mind-blowing" product that made a cultural dent, some say, harking back to the iPad in 2010 and iPhone in 2007.

Incremental upgrades of the iPhone and iPad led comedian Bill Maher to joke that "Apple fans go gaga over new Apple product that is nearly the same" as previous Apple product.

"Apple's biggest challenge is to define itself in the post-Steve Jobs era," says Salesforce.com CEO Marc Benioff, who worked at Apple in the 1980s. "Where it is struggling is when it pretends to be Steve Jobs instead of actualizing its new identity. They need to find out who they are now."

"Where is the magic? Where are all the great advances that we were promised?" says Wadhwa.

Indeed, Apple plummeted to 26th from 5th on Forbes magazine's list of the world's most innovative companies this year over concerns that Apple can maintain its edge without Jobs. Salesforce.com was No. 1.

Even last month's iPhone 5 announcement lacked the usual Apple sizzle. A consummate showman, Jobs would dazzle an adoring audience with flawless product demonstrations, a surprise guest such as Bono, and a final "one more thing," where a cool product was unveiled. Much of the news had crept out before the product was shown - a strict no-no in the Jobs era.

"All the details were out before the announcement - photos, dimensions,everything," says King, principal analyst at Pund-IT Research, who attended the iPhone 5 launch. "It was an oddly flat, underwhelming event, but that doesn't mean they won't sell a ton of them."

The power of Steve

Flash back more than a year ago,when Jobs resigned for health reasons on Aug. 24, and then-chief operations officer Cook took over as CEO. That day, Apple stock closed at $374 per share. By late July 2012, it was trading around $600 when Apple reported a disappointing quarter that sent shares to $570. It rebounded to $660 by late August before its resounding patent-infringement victory in court against Samsung sent the price to a then-record $675.

At a current stock price of $666.80, Apple shares have climbed 79% since Cook was named CEO.

And yet, there is no guarantee of long-term success, given the volatility of tech and the fast-shifting tastes of consumers. High-tech's history is dotted with major cycles and blur-fast change. Computers have gotten smaller, to the size of smartphones and 7-inch tablets; broadband allows anyone, anywhere to shop and communicate at any time; and social networks have upended how people interact.

Apple's ability to adapt and redefine markets such as phones and music is a key part of that narrative. The mobile market poses a particular challenge, because many consumers change their device every few years. Should a competitor swoop in with a smartphone and customers grow weary of, say, iPhone 8, fortunes could change quickly for Apple, say King and others.

Apple declined to comment for this story. But longtime Apple watcher Roger McNamee, co-founder of private-equity firm Elevation Partners, says the company enjoys a competitive edge because its products maintain a sterling reputation with consumers and, increasingly, businesses.

"Apple is playing a long-game of innovation," McNamee says. "How much innovation it requires is based on pressure from others and, aside from Samsung, that isn't much."

Microsoft faced a similar predicament in 2008, when co-founder Bill Gates handed CEO duties to Steve Ballmer. Despite long-term questions about its standing in the post-PC era, Microsoft's revenue and profits remain strong.

"Tech companies need incredibly strong leadership," says Zach Nelson, CEO of NetSuite, an enterprise-software company. "Oracle exploded to the next level" after co-founder Larry Ellison returned from a hiatus.

Apple persevered for years after Jobs was famously jettisoned in 1985, but it eventually needed him to save the day. History may repeat, but Apple is in far better shape now - mainly because an ailing Jobs formulated a long-term strategic road map for Apple, says a former employee who had knowledge of the company's strategy, but asked not to be identified because of ongoing business dealings with Apple.

An essential question, analyst Gartenberg and others ask, is, how far into the future did Jobs plan? "It's a good question to ask where future growth comes from, what new products need to be introduced and new categories of devices created," Gartenberg says.

"You can hand off a two-year plan, no problem," says Mark Curtis, chief client officer at design consultancy Fjord. "When it gets to five years, that's hard."

Even Jobs was fond of saying,"'I don't have a crystal ball,'" the former Apple employee said.

Still, Jobs openly discussed a digital living room for consumers during iPod and iPhone announcements. He strongly suggested Apple as a hub for music, video and communication. That's where the revamped Apple TV comes in.

Apple has already shown a willingness to venture into new areas, such as maps, and could just as easily take on Google in search and Facebook in social networking, says Nextdoor CEO Nirav Tolia, speculating on Apple's future plans.

"I asked Steve several times via e-mail why they don't go into the (corporate business) market," Nelson says. "But he wanted to focus on consumer devices. (The strategy) worked beautifully, but their products could play well in business space. It seems like a gigantic missed opportunity."

Will Apple become predictable?

The post-Jobs Apple faces more challenges than other tech giants. Jobs' death was like losing a father figure, say several former Apple employees.

"There aren't many leaders with long-term vision," says Mary Brittain-White, CEO and founder of Retriever Communications, whose mobile product she acquired from Apple in 1996. She consequently worked closely with Apple after the return of Jobs in late 1996.

"Corporations are run, for the most part, by predictable people," she says. "That results in mediocrity."

Adds McNamee: "Apple is run by guys with strong financial backgrounds ... and it has given indications it has forgotten about its past success."

Indeed, the specter of Jobs looms largely over Apple one year later.

A biography about him, Steve Jobs, is still a best seller. There are two movies in the works - one in production, starring Ashton Kutcher; the other to be penned by Academy Award-winner Aaron Sorkin.

Jobs' impact on the world through influence-shaping products has permeated the mindset and culture of Silicon Valley - maybe too much, says Ken Segall, author of Insanely Simple: The Obsession that Drives Apple's Success. He served 12 years as ad agency creative director for Jobs at Apple and Next Computer.

"Some people are in tech for the wrong reasons," says Segall, whose team was responsible for the Think Different campaign. "They're trying to build products that change the world, rather than do what Jobs did: Create great jobs that, in the end, changed the world."

Apple's high bar

Apple's incredible run of success has created heightened expectations that no company - even Apple - can live up to, Gartenberg and Lashinsky say.

"Every burp and hiccup is analyzed. How many years did Apple go between major refreshes of iMac and (other products)?" Lashinsky says in Apple's defense. "IPad is just two years old, the iPhone five."

When Jobs returned in late 1996, after more than a decade in exile, the company was in deep trouble and had to take risks. In addition to making great products, Jobs had an uncanny ability to replace best sellers such as iPod with iPhone.

Today, it has a highly profitable business model to defend against Google, Amazon and Samsung - whom it sued for patent infringement. That case had more to do with protecting market turf than transformative innovation, says Stanford University law professor Mark Lemley.

"Young and creative businesses don't usually file patent lawsuits - older, mature businesses do to hold onto their turf," Lemley says. "It's the second-best choice on how to grow."

For now, Lashinsky and others agree the operations-detailed Cook is the right CEO for Apple and has performed superbly.

The creative/innovative heir to Jobs' mantle isn't at the top of the company organization chart, but two executives leap to mind: lead designer Jonathan Ivie and Scott Forstall, who is in charge of mobile software.

"(Forstall) seems the most presentable, good-looking exec with nerd chops," Lashinsky says. "He is comparable to Jobs. He's a CEO in waiting, but what isn't clear is when."

But Suiter, Jobs' former creative director, says Apple will inevitably become a different company going forward without its once-in-a-lifetime leader.

"There's no way it can be the same. The guy was the most amazing, creative director I ever met in my life."